When the market corrects itself the way it has over the past couple of weeks, it is an ideal time to build a watch list. Big-caps such as Facebook (FB), Tesla (TSLA), Netflix (NFLX), Google (GOOG), SolarCity (SCTY) and Qihoo 360 (QIHU) are some of the obvious stocks to watch, but I like to dig into the thinly traded small-caps that have the potential to explode to the upside as they become better known in an improving market.
Here are five names on my radar.
Montage Technology Group (MONT) is a fabless provider of semiconductors used in home entertainment and cloud computing. Earlier this month it announced better-than-expected earnings on sales of its set-top boxes in China and other emerging markets. Friday it priced a secondary offering at $21, which should serve as support. Intel (INTC) owns a large stake in the company.
Super Micro Computer (SMCI) provides high-performance servers, storage and rack solutions. Half of its business is in China. The shares moved sharply higher Jan. 22 after posting better-than-expected sales and earnings. Estimates have continued to come up and the company is now expecting net-income growth of 64% in 2014, but it trades with a trailing price-to-earnings ratio of just 20. With this cheap valuation and strong chart, we are looking for momentum to build in a better market.
Novadaq Technologies (NVDQ) is a medical-device maker with an innovative product used to perform X-rays during surgery. It also has a product called Firefly that is used in conjunction with robotic surgery for high-definition color imaging. This is primarily a story stock but the company is seeing revenue grow at a 50% pace and should continue to attract attention.
Research Frontiers (REFR) designs suspended particle device, or SPD-Smart, technology that controls the amount of light, glare or heat that passes through glass or plastic. The company recently announced that the new Mercedes Benz 600 employs its technology to turn the roof transparent with the touch of a button. The company has been gaining attention and has an attractive chart.
Fonar Corp. (FONR) develops MRI scanners that allow patients to stay in an upright position. The company had a huge quarter and gapped up sharply last November. It continued to run due to its exceptionally low valuation but has recently pulled back and is now trying to find support. The company has consistently grown earnings and saw its revenue increase by 77% in the September 2013 quarter. We are looking to move up as traders anticipate the next report. There is no analyst coverage.
These stocks are all thinly traded which means there is high risk, as well as high reward. Positions must be very carefully managed.
All charts by TCNet